China copper: CIF import premium slips further on high stocks
Source: www.chinamining.org Citation: Platts Date: March 17, 2016
The spot import premium for London Metal Exchange-registered brands of copper cathode on a CIF China basis has fallen further, pressured by high stocks in Shanghai Futures Exchange warehouses and little import interest on the lack of arbitrage opportunity, industry sources said Wednesday.
Platts lowered its CFR China copper premium assessment to $60-$75/mt Wednesday, down from $70-$85/mt last week on lower indications heard.
A Southeast Asian trader indicated the CIF China premium for copper at $65-$75/mt, down from $80-$85/mt last week, while an east China-based trader heard around $70, down $15-$20/mt on the week.
"Yes, the CIF China premium is down mainly due to rising stocks in the country. When the Chinese yuan devalued in November-December 2015, there was a good profit margin from buying LME copper at cash price and selling it at the SHFE. China`s copper imports were up, resulting in the high stocks volume in SHFE warehouses. In addition, Chinese domestic demand is still weak as it is not the buying season yet," the eastern Chinese trader added.
Several Chinese sources also heard of the further fall in the CIF China premium for copper as copper stocks continued to rise in the country.
A north China-based analyst heard it at $60-$70/mt, compared with $70/mt last week; an east China-based industry source heard at $60-$70/mt, down from $85-$90/mt the previous week; and a north China-based industry source heard an average of $65/mt, down about $5/mt week-on-week.
"There`s no arbitrage opportunity at the moment. In fact, there`s an import-related loss of Yuan 800-1,000/mt," added the northern Chinese analyst.
The eastern Chinese industry source and the northern Chinese industry source noted that current copper prices had generally stayed on the high side but were rather rangebound.
"China`s recent weak industrial output statistics have dampened copper prices. But a weaker dollar has given copper prices some support. The dollar has weakened last night, pending on the announcement from the US Federal Open Market Committee`s meeting due to end later today," the eastern Chinese industry source added.
China`s value-added industrial output gained 5.4% on the year in the first two months of 2016, the lowest monthly growth since November 2008, official data showed Saturday.
The 5.4% growth retreated from the 6.8% increase in the Jan-Feb period of 2015 and the 5.9% in December 2015. It was also lower than the 6.1% annual gain seen in 2015, according to the National Bureau of Statistics.
The weekly SHFE stocks totaled 350,138 mt on Friday, up 14.8% on the week, while LME copper stocks were 174,175 mt, down 6.7%.
Front-month April 2016 copper futures closed at Yuan 37,390/mt ($5,736/mt) on the Shanghai Futures Exchange Wednesday, up from Yuan 37,170/mt last Wednesday and up from Yuan 37,130/mt Tuesday.
LMESelect`s three-month copper price was around $4,941-$4,943/mt Wednesday afternoon, while the LME official three-month price was $4,902.50-$4,903/mt Tuesday.
Chinese spot copper concentrate treatment and refining charges (TC/RCs) continued to be heard steady this week, sources said.
TC/RCs for the clean ore were mostly at $75-$85/mt and 7.5-8.5 cents/lb, while mixed ore stayed above $100/mt and 10 cents/lb.
TC/RCs are fees charged to miners by smelters to treat and refine copper concentrate to produce copper metal. They typically rise when concentrate supply is ample and fall when supply is tight.
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